Jenson Button's Brawn-Mercedes may be even faster than his historic victory in Melbourne on Sunday suggested. A senior source in the Brackley-based team has told the Guardian that they have been intentionally holding back in some sessions, saying it would be "foolish to annihilate people" at the start of a world championship they believe they can win.

The Brawn GP 001 has been the subject of some controversy, with a hearing in Paris on 14 April due to rule on whether the car's diffuser is illegally creating downforce. The source at Brawn said the car's design legally interprets the new FIA regulations, adding that he was shocked at the poor times being posted by the other teams at pre-season testing in January.

The team that nearly ceased to exist in December, when the Japanese carmaker Honda decided to pull out of the sport, know they must capitalise on their early advantage and they have reasons to be confident about making a challenge for the drivers' and constructors' championships.

"I think, basically, that if someone is two-tenths off us they can feasibly win the race but, if we're half a second in front, which is probably where we are at the moment, although we don't necessarily look like that, it is just foolish to just annihilate people all the time," he said. "I think we have a little bit in the bag. We've got good stuff coming and I think we have reason to be confident."

Button led the Australian grand prix from flag to flag and his team-mate Rubens Barrichello's second place meant Brawn completed the first debut one-two since 1954, when two other Mercedes-powered cars, driven by Juan Manuel Fangio and Karl Kling, took the top two spots on the podium at the French grand prix.

"One of the good things about the Brawn car is that competitors will look at all of it and say, 'That's the bit that's making it fast.' But it is not necessarily one thing; they could be focusing on something that is not really a big performance driver."

He praised the management style of Ross Brawn, who led a buyout of the team at the beginning of this month. "He's been very frugal with what he's delivered to the staff but what he has done has actually had some substance," the source said. He credited the head of aerodynamics, Loic Bigois, as the "absolute key" to the development of a car that they knew 12 months ago would be competitive.

"[Loic] managed to get a blend of ­performance-orientated engineering that has superseded what went before," he said. "The 1080, last year's car, was not a bad car, but of course another major performance factor has got to be the ­Mercedes engine."

That engine was not fitted to the car until the start of March, days before the car's shakedown at Silverstone. Despite their preparations running two months behind everyone else, and without the physical manifestation of their research, the source claimed the team knew they had the fastest car in January.

"We were looking at everybody else's times asking why were they all so slow," he said. "Our research was telling us we would be the quickest car."

He explained that life in Brackley has been difficult since Honda's announcement in December. Despite confirmation of a sponsorship deal with Richard ­Branson's Virgin Group, 275 impending job losses suggest all is not perfect at Brawn HQ.

"There has been ups and downs, mainly downs," he said. "It's been a very strange atmosphere, as you can imagine. It has been a bit of a Cinderella story."

An injection of Virgin cash could be key to Brawn challenging Ferrari and McLaren. "I think we need a modest amount of investment, we need to make sure our new size is efficient and we need to keep ahead of people," the source said. "We've still got a lot in the bag. The other teams will come back at us very hard over the season, but, long-term, Brawn will be a force in the top three – certainly while these regulations are stable and the budget cap remains."